S&P: CCM Merger Inc. Issue Ratings Affirmed On Credit Facility Amendment And Upsize
CCM plans to use proceeds from the incremental term loan issuance, along with cash on hand, to repay a portion of its senior notes and to pay debt breakage costs and transaction fees and expenses.
We also affirmed our 'CCC+' issue-level rating, with a recovery rating of '6', on the company's 9.125% senior notes due 2019. Pro forma for the transaction, the company will have $200 million outstanding on the senior notes. The '6' recovery rating indicates our expectation for negligible (0% to 10%) recovery for lenders in the event of a payment default.
The 'B' corporate credit rating on CCM Merger is unchanged. The rating outlook is stable.
"The rating reflects our expectation that modest growth in EBITDA through 2017, coupled with continued good free cash flow generation, will support debt repayment at the company leading to adjusted debt to EBITDA improving to the low - to mid-5x area by the end of 2017," said S&P Global Ratings credit analyst Stephen Pagano.
Despite a weaker than anticipated second quarter of 2016, when EBITDA declined in the mid-single digits due to softer gaming revenues and elevated casino expenses, we expect the overall economic and competitive environment in Detroit to remain favorable and forecast continued modest growth in gaming revenue through our projection period. CCM has improved its credit measures in recent periods, including reducing leverage by over a turn since 2014, due in part to good gaming revenues leading to EBITDA growth as well as both mandatory and voluntary debt repayment. We anticipate that the company will continue to use a majority of its free cash flow to repay debt, leading to continued improvement in credit measures through 2017.
The stable outlook reflects our expectation that modest growth in operations, coupled with continued good levels of free cash flow, will support debt repayment, leading to adjusted debt to EBITDA improving to the low - to mid-5x area by 2017.